Ministry of Consumer Affairs, Food & Public Distribution
Government intervenes to support sugar sector and sugarcane farmers by means of enhancement and augmentation of ethanol production capacity
Cabinet approves additional funds under the Scheme for extending financial assistance to sugar mills for enhancement and augmentation of ethanol production capacity
The Cabinet Committee on Economic Affairs, chaired by Hon'ble Prime Minister Shri Narendra Modi has given its approval for funds amounting to Rs.2790 crore towards interest subvention for extending indicative loan amount of Rs.12900 crore by banks to the sugar mills under “Scheme for extending financial assistance to sugar mills for enhancement and augmentation of ethanol production capacity” for the 268 applications/proposals, in addition to Rs.1332 crore already approved by CCEA in June, 2018.
CCEA has also approved Rs.565 crore towards interest subvention for extending indicative loan amount of Rs.2600 crore by banks to the molasses based standalone distilleries to augment capacity through installation of incineration boilers and other methods in the existing distilleries for achieving ZLD and additional equipment for ethanol production as well as for setting up of new standalone distilleries for ethanol production. A separate scheme for the molasses based standalone distilleries would be formulated accordingly by Department of Food & Public Distribution.
In continuation of the earlier scheme approved by the Cabinet Committee on Economic Affairs  in June, 2018 and with a view to support sugar sector and in the interest of sugarcane farmers, the CCEA chaired by the Prime Minister today approved the proposal for extending soft loans of about Rs. 15500 crores through banks to sugar mills and molasses based stand alone distilleries under the Scheme for extending financial assistance for enhancement and augmentation of ethanol production capacity for which Government will bear further interest subvention amounting to Rs. 3355 crore for five years including moratorium period of one year. As a result of implementation of the scheme being notified after this decision of CCEA and the earlier scheme approved by CCEA in June, 2018, the country will have sufficient capacity to divert surplus sugar during surplus phase for production of ethanol.
Government has notified National Policy on Bio-fuels in year 2018 under which diversion of B-heavy molasses and sugarcane juice to produce ethanol has been allowed in surplus seasons. In order to augment ethanol production capacity and thereby also allow diversion of sugar for production of ethanol, in earlier approved scheme, soft loan is being extended through banks to the sugar mills for setting up new distilleries/ expansion of existing distilleries and installation of incineration boilers or installation of any method as approved by Central Pollution Control Board for Zero Liquid Discharge  for which Government had approved interest subvention of Rs. 1332 crore. In principle approval was accorded by Government for extending soft loans of about Rs. 6139 crores to 114 sugar mills under that scheme.
However, in order to further enhance and augment the ethanol production capacity in the country, it has now been decided by Government to extend soft loans amounting to Rs 12900 crores to some more sugar mills for setting up new distilleries/ expansion of existing distilleries and installation of incineration boilers or installation of any method as approved by Central Pollution Control Board for Zero Liquid Discharge for which Government will bear interest subvention of Rs. 2790 crore. About 268 sugar mills are likely to be benefitted as a result of this measure.
Besides, to further optimize the ethanol production capacity, it has also been decided to extend soft loans amounting to Rs. 2600 crores by banks to the molasses based stand-alone distilleries to augment capacity through installation of incineration boilers and other methods in the existing distilleries for achieving ZLD and additional equipments for ethanol production as well as for setting up of new stand-alone distilleries for ethanol production for which Government will bear interest subvention of Rs. 565 crore.
This decision would further help in achieving blending target for mixing ethanol and in achieving the objectives of National Bio-Fuel Policy, 2018 and to reduce sugar inventories by diversion of B-Heavy molasses and sugarcane juice for ethanol production and thereby sacrificing sugar during surplus phase. It will also improve liquidity of sugar mills by way of value addition to their revenues from supply of ethanol under Ethanol Blended Petrol Programme  thereby facilitating them to clear cane price dues of farmers.
Benefits:
The approval of interest subvention will help in:
- improving liquidity of sugar mills by way of value addition to their revenues from supply of ethanol under Ethanol Blended Petrol Programme ;
- reducing sugar inventories and thereby facilitate timely clearance of cane price dues of farmers and
- achieving 10% blending target of EBP.